Bunnell Hill Development will begin construction this month on a 63,000-square-foot speculative commercial building in Harrison, where it recently filled a similarly sized facility with nine tenants.

The project is unusual in today’s capital-constrained real estate market, where many lenders have sworn off all but the safest commercial loans. In this case, Wilmington’s NB&T Financial Group Inc. is extending a $5 million loan to refinance the first multi-tenant building at the Harrison Commerce Center and fund the $3 million phase two.

“Some folks told us we were crazy to do a speculative building, that we’d never get it financed. Well, by golly, we did,” said Joe Kramer, vice president of Bunnell Hill’s parent company, Henkle Schueler & Associates Inc. of Lebanon.

The Harrison project brings to five the number of new commercial structures erected at the 160-acre industrial park since 2003, when a group of investors organized by Henkle Schueler bought the property from Cincinnati Gas & Electric. The utility held it for land-banking purposes, offering it up when Gap Inc. scoured Cincinnati for a potential distribution center. That project landed in Northern Kentucky, but investors saw potential in the site, which is visible from Interstate 74 and is less than 30 minutes from the airport and downtown. It’s a 46-minute drive to Honda’s new auto plant in Greensburg.

The city of Harrison used tax increment financing to bring sewer and road improvements to the site. Kramer originally expected to sell out the property within 10 years. He now thinks it will take up to 15 years, although various companies have already brought 352 jobs.

“We didn’t view it as real speculative,” said Stephen Klumb, senior vice president in charge of commercial lending for NB&T’s main operating subsidiary, National Bank and Trust Co. “A lot of the problem with commercial real estate today is a byproduct of not knowing your customer or understanding the risk that you’re in. We know this customer.”

The Wilmington bank has three other loans with Henkle Schueler or its affiliates and deems the Harrison site capable of attracting tenants. It also has more than $700 million in assets and a low delinquency rate in its commercial loan portfolio of about $270 million, said Klumb.

“If you start looking at loans as if they’re all going to default,” added Klumb, “you’re not going to be making many loans.”

As the Business Courier previously reported, Cincinnati commercial property owners ended 2009 in default on more than $300 million in securitized loans. And the region’s default rate of nearly 9 percent is higher than the national average, according to Trepp LLC, a New York research firm. Calfornia-based Foresight Analytics said U.S. banks charged off $39 billion on bad loans in 2009 and that isn’t likely to decline before 2011.

With commercial loan delinquencies peaking, banks remain skittish about investing new capital in even the safest of projects, said Tom Banta, president and chief operating officer of Covington’s Corporex Cos.

Banta recently secured financing for an $80 million hotel and office project in Denver, where it landed Children’s Hospital Association as an anchor tenant and contributed nearly $20 million in equity to the deal. Despite those reassurances, no single bank was willing to extend the $48.5 million in private debt required for the project.

“It took two banks to finance the office building and three for the hotel,” said Banta. “They’re still not willing to take on risk of any significance.”